WASHINGTON, DC—On Wednesday the yield curve inverted—that is,yields on two-year Treasury bonds were higher than those on theten-year bonds—for a short period of time before the marketsopened. Brief though the inversion was, it roiled the stock marketsbecause of the widely accepted stat that recessions typicallyfollow 18 to 24 months after this type of yield curveinversion.
Of course, the yield curve has been steadily declining sinceJanuary 2014 and other portions of it have inverted in recentmonths, such as the 10-year/three-month yield curve. Thesedevelopments, though, did not set off widespread alarm bells suchas the psychological milestone of the 10-year/two-month piece.
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